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ICBA: Housing Finance Reform Must Allow Community Banks to Continue Serving Main Street

Washington, D.C. (February 11, 2011)-The Independent Community Bankers of America (ICBA) today said that the nation's housing finance system must continue to provide a variety of finance options to meet the needs of different consumers, housing types and locations. Following the release of the Obama administration's plan on housing finance, ICBA reminded policymakers that a stable secondary market for residential mortgages is essential to community banks and Main Street America, while also stressing completely privatizing the secondary mortgage market would have ruinous effects both on community banks and the customers they serve. 

"A reliable secondary market is essential so that the nation's Main Street community banks can continue to offer residential mortgages to their customers," said Jim MacPhee, ICBA chairman and CEO of Kalamazoo County State Bank, Schoolcraft, Mich. "While reform should focus on preventing future crises in the housing market and embracing the common-sense underwriting standards long practiced by community banks, it should not eliminate all government involvement in the secondary market while turning it over to Wall Street.  This would have ruinous effects by eliminating community banks from the mortgage market, depriving small town and rural customers of the ability to get the mortgage financing they need, especially in these underserved markets. It will also make the too-big-to-fail institutions even bigger, and will create a dangerous concentration of mortgage assets in just two or three mega institutions."

ICBA supports a secondary market that is impartial, financially strong and reliable. All lenders, regardless of size or volume should have access to it. Its future structure should not foster further consolidation in the mortgage market, which would only result in higher mortgage costs and fewer consumer options.

Regarding the Federal Home Loan Bank system, FHLBanks must remain a reliable source of funding, liquidity and other products to serve the needs of their member-owners. ICBA believes the structure of the FHLBanks should be maintained.

"ICBA urges Congress and the Administration to move thoughtfully, deliberately and realistically, applying the lessons of the credit crisis to create a secondary mortgage market that is impartial as well as financially strong and reliable," MacPhee said. "While this is a critical debate with serious implications for our housing system, we can all agree that we must preserve the ability of community banks to meet the needs of Main Street customers and communities."

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